UBS has expressed a bullish outlook for the pound, citing recent comments from new UK Chancellor Rachel Reeves on the government’s growth agenda. Reeves stressed the limited scope of government spending, indicating that the administration will focus on supply-side reforms to stimulate investment and growth.
UBS noted that despite similar pledges made by previous UK governments, the current focus on a dynamic approach to change could be beneficial for the UK economy.
The brokerage firm also highlighted the political stability in the UK, noting that it has the most stable government among the G7 countries for the next five years.
According to UBS, this stability is expected to attract structural inflows into the pound, which represents a positive shift for the currency in the post-Brexit era. As a result of these factors, UBS maintains its exchange rate target at 0.8400.
The outlook is based on a combination of a stable political environment in the UK and the potential positive impact of the government’s commitment to supply-side reforms. UBS notes that these factors could lead to increased investment, which in turn could support growth in the UK economy.
UBS forecasts suggest a scenario where the pound could rise against the euro, possibly reaching 0.8400. This would indicate a significant appreciation in the value of the pound against its European counterpart.
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